How to ask the right questions when buying a short sale property

Short sales, simply put, are very complicated.  This article is meant for potential buyers who are thinking of writing an offer on a short sale.  What is a short sale?  A short sale is when the bank(s) who is holding the mortgage(s) agrees to take less than what is owed in order to avoid foreclosure. There is no sure fire way to know which short sale will be approved and which ones will not.  The key to any short sale is a lot of patience.  Be prepared to wait 6 months or more for a short sale to get approved.  The other difficulty with short sales is that not all short sales get approved.  I have heard statistics that only 1 in 8 short sales are approved.  I’ve seen other statistics that only 1 in 10 short sales are approved.  These questions will help you figure out which properties have a better likelihood of getting approved and finally go to settlement.

How many loans/mortgages exist on this property?

1 mortgage is better than 2 or more mortgages.

Are there any additional liens on the property (tax liens, mechanic’s liens, child support, equity lines of credit, water bills, etc)? 

It is preferable to pick a property without any these additional liens.

If the property is a condo or has an HOA (Home Owners Association), is the Condo/HOA fee current? 

In most cases the HOA/Condo fee has to be paid by someone before they will approve the sale.  If this is the case ask the owner to continue to pay these fees on time and keep account current.

Has the bank(s) holding mortgages been notified of the short sale?

It is better if the bank(s) have already been notified that owners intend to do a short sale.

Have you received any other offers? 

There are agents who will accumulate offers until the short sale has been approved.  There are other agent’s who will pick one offer and one back up offer and work with only one offer to get an approval.  The second scenario is best.

Has a loss mitigator/negotiator been assigned? 

It is preferable to have a loss mitigator already assigned, but some banks will not assign a loss mitigator until an offer has been submitted.

 Was this the primary residence or an investment property?

It is much easier to get an approval for a primary residence than for an investment property.

Is the seller/owner in the process of filing bankruptcy?

A short sale cannot proceed if the owners are in the process of a bankruptcy.

Is the owner using a professional short sale negotiator?

This is crucial.  There are agents out there that take on short sale listings without the skill and knowledge to negotiate a short sale.  If the agent is acting as the negotiater ask about her/his track record with getting short sales to closing.

Is there a geniune hardship?

Some legitimate hardships include divorce, severe illness, job loss and pay cut.

Please visit my website for more information on short sales and foreclosures:

http://www.marylandonlinehomes.com